Bush, a sole trader, commenced trading on 1 January 20X2.

a. Telephone expense details

The quarterly rental payable in advance on 1 January, 1 April, 1 July and 1 October is £30. Telephone calls are payable in arrears: January to March 20X2 paid 1 April 20X2 £318; April to June 20X2 paid 1 July 20X2 £422; and July to September 20X2 paid 1 October 20X2 £172.

He is to prepare his first financial statements to 31 October 20X2 and estimates that the cost of his calls for October 20X2 will be £44.

Rent expense details

Bush also pays rent quarterly in advance for his premises and has made payments as follows:

1 January 20 X 2............................ £800

1 April 20 X 2................................ £800

1 July 20 X 2................................ £800

1 October 20 X 2.......................... £800

Required

Prepare Bush's ledger accounts for telephone and rent for the period from 1 January 20X2 to 31 October 20X2, showing clearly the amounts to be transferred to his statement of profit and loss for the period together with any balances carried forward on 31 October 20X2.

b. At 1 November 20X2, the following balances were brought forward in the ledger accounts of Bush:

You are told the following:
Rates are payable quarterly in advance on the last day of December, March, June and September, at the rate of £4,000 per annum. Interest was received during the year as follows:
2 November 20 X 2............... £250 (for the six months to 30 October 20X2)
3 May 20 X 3........................£600(for the six months to 30 October 20X2)
You estimate that interest of £300 is accrued at 31 October 20 X 3.
Electricity is paid as follows:
5 December 20X2 ......................£1,000 (for the six months to 30 October 20X2)
10 March 20X2......................£1,300 (for the six months to 30 October 20X2)
8 June 20X2..........................£1,500 (for the six months to 30 October 20X2)
7 September 20X3...................£1,100 (for the six months to 30 October 20X2)
At 30 October 20X3, the electricity meter shows that £900 has been consumed since the last bill was received.
At 30 October 20X3, the balance of trade receivables amounts to £250,000.
The provision for doubtful debts is to be amended to 10 per cent of trade receivables.
Required
Write up the ledger accounts for:
1. Rates payable;
2. Electricity;
3. Interest receivable;
4. Provision for doubtful debts. and bring down the balances at 31 October 20X3.
c. Explain two accounting concepts that govern the treatment of the above items in the financial statements of Bush.

Transcribed Image Text:

Rates payable account Electricity account Interest receivable account Provision for doubtful debts accountCr £1,500 28D0 0300 £4,800 Cr Dr